I paid a private student loan assistance company take care of my loan consolidation. They mistaking included a parent loan causing me only one income based repayment option.

When I received my paperwork from the Fed servicing department I missed my 10 day grace period to make any changes to the loan. I have been out of state for a funeral (seriously). I tried to get the consolidation stopped but I can’t.

The student loan assistance company even admitted this was their mistake but I am the one stuck paying the price for their mistake.

I work for a non profit so I planned to do the loan forgiveness program. My payment is $320 more than it was support be. I planned to pay the parent plus loan separately because I knew it would limit my options for an income based repayment.

I’ve tried calling the department of ed and the servicing company several times trying to explain I wasn’t even in the state to review my loans within the 10 days. They told me it was too late.

Isn’t there a way to stop the process of my consolidation? If not, is there any legal responsibility the private company I paid to take care of my consolidation have some responsibility?

Carol

Answer:

Dear Carol,

I understand exactly what happened here. Most consumers don’t realize that the unbelievable majority of companies out there who sell student loan assistance, are just providing a document preparation service and not any specific expertise.

It is clear, the student loan assistance company totally screwed this up. By including the Parent PLUS loan in the consolidation it knocked you out of eligibility from the lower monthly payment Income Based Repayment (IBR) program since consolidation that include a Parent PLUS loan are only eligible for the Income Contingent Repayment (ICR) approach.

If your student loans were taken out after July 1, 2014 then the IBR payment would be 10 percent of your discretionary income. The ICR would be 20 percent of your discretionary income. If the loans were before the 2014 date then the payment would be 15 percent.

And it is true that you have 10 days to review the consolidation documentation and decide if you want to cancel it or not. Being out of pocket for that review time creates a unique problem.

I understand why the federal loan servicing company could not unwind this transaction. The money has already been disbursed and trying to get it corrected would create an administrative nightmare. But tough does not mean impossible.

At least both the ICR and IBR payments will count towards your Public Service Loan Forgiveness forgiveness.

So faced with this situation I would certainly ask the student loan assistance company for a refund of whatever you paid them. While that seems like a no-brainer for them, the refund is not going to come anywhere close to paying for the mistake.

The next steps will require effort.

You should use every available avenue to ask for help to try and get this administratively rolled back.

Your remedies include filing a complaint with the Consumer Financial Protection Bureau regarding the inability to fix an obvious error.

You should contact your congressional representatives, in writing, and ask for help.

And of course you could hire a local attorney to represent you in some action against the student loan assistance company for the damages you are facing from their obvious error. A $320 per month mistake is a $38,400 error by the student loan assistance company ($320 * 120 months). This is far beyond an “oops.”

I would suggest if you go that route, that you first retain a local consumer assistance attorney who is licensed in your state to write a letter on your behalf to the company and attempt to negotiate a settlement of the financial error they created.

If you want to try and do this yourself, then this process, might be helpful.